Revision as of 07:22, 22 October 2004

University Research and Economic Development

State and regional government have given hundreds of millions of dollars in the hopes of becoming becoming the uch as Bio or Nano Technology. How does this kind of policy setting influence the research agenda? Does funneling public money in this way necessarily lead to economic development such as more jobs and tax revenue?

Hong

First Post

First Post

--David 22:38, 21 Oct 2004 (PDT)

Recent FCC Decision

Hi, sorry if this question is kind of long. I started to ask this at the very end of lecture on Thursday (in San Diego) but the speaker didn't hear me. :)

There was a brief discussion at the very end of lecture regarding the economics of the "last mile" that pertains to a debate that's been playing out in the press lately that I've always wondered about. As the speaker pointed out, long-distance phone service is a competitive market, but local phone service is essentially a monopoly (and as of today no clear technology has come to the rescue to alter this situation, VOIP and satellite/wireless technology notwithstanding).

Anyway, the speaker mentioned this briefly, but to recap, I believe that the regional Bells (such as Verizon and SBC-- the LOCAL phone service providers) have for years been required by the government to lease the use of their lines out to competitors at set prices. The argument for that policy, as I understand it, was that since they are monopolies, regulating them in such fashion is necessary to keep consumer phone prices reasonable.

However, many critics of this policy have pointed out that this produces a powerful disincentive for the Bells to invest in their network, since they know that they won't be able to adequately recoup on such investment (they'll be forced to share with competitors), and this is one of the reason broadband/fiber-to-the-home deployment lags in the United States.

There have been a series of recent decisions at the FCC that I believe have now effectively reversed this policy. (Check out the article I copied/pasted from the Wall Street Journal below; hopefully that counts as "fair use" :))

Each side in this debate makes a lot of noise through hired lobbyists so I've found it difficult to cut through the spin. Just wanted to ask the speaker (and anyone else): from an economists' perspective, who has the better end of the argument here? Is the current FCC policy of deregulation a wise one? Is it likely to speed broadband deployment, as deregulation proponents have suggested? Is it likely to raise phone service prices, as critics and AT&T lobbyists have suggested?

Thanks, --Erik

Regional Bells Get Broadband Win

FCC Votes to End Rules On Certain Network Sharing; Rivals, Activists Decry Move

By ANNE MARIE SQUEO Staff Reporter of THE WALL STREET JOURNAL October 15, 2004; Page B8

WASHINGTON -- Regional Bells including Verizon Communications Inc. and SBC Communications Inc. scored a major victory when the Federal Communications Commission voted to end requirements that the companies share certain fiber-optic broadband networks with rivals.

The decision, which would let the Bells build fiber-optic networks to within 500 feet of a customer's home, is likely to help the Bells in their drive to expand offerings into television and video services to better compete with cable-TV companies, which have been taking away phone customers.

SBC yesterday said it would accelerate its plan to build an all-digital, high-speed network that reaches 18 million homes by 2007, two years earlier than planned. "This is the latest in a series of broadband rulings that demonstrate this administration and the FCC understand that keeping outdated regulation off of tomorrow's technology will boost jobs, investment and innovation," said SBC Chairman and Chief Executive Edward Whitacre.

The FCC 's decision is another blow to AT&T Corp. and other companies that entered the local-phone market through a provision in the 1996 Telecommunications Act requiring the Bells share their local-phone networks with rivals.

AT&T Vice President Len Cali said yesterday's order likely will lead to an "inevitable grab by the Bells to expand their [phone] monopoly."

Consumer activists and rivals decried the FCC 's move, saying it will lead to higher prices for consumers.

As telephone and cable industries "tighten their hold on high-speed Internet access, consumers will see their choices diminish and their bills skyrocket," said Gene Kimmelman, senior policy director for Consumers Union, an advocacy group.

Coming just months after a federal appeals-court ruling that is expected to lead to higher leasing rates for local-phone service, the reduced access to high-speed Internet lines will limit the options for many service providers. Companies such as Vonage Holdings Corp. often use Bell rivals to connect calls cheaply from their Internet phone customers to those callers using the traditional phone system.

While yesterday's decision applies only to the residential market, the FCC said it was considering an extension to business customers as well, an area where Bell rivals have been able to gain significant ground during the past three years.

The issue gets to the heart of FCC Chairman Michael Powell's vision for what constitutes competition in a converging marketplace, where telecom companies will provide movies and television service to the home and electricity providers also will offer broadband. In this environment, at least four major industries -- telecom, cable, wireless and electricity -- would compete head-on.

To that end, the FCC also adopted measures intended to encourage electricity providers to use the nation's power grid to provide communications services. This technology is still in its infancy, with trials being done around the country.

Write to Anne Marie Squeo at annemarie.squeo@wsj.com

The anti-network effect?

--Remegraw 00:22, 22 Oct 2004 (PDT) With the network effect we saw that consumers shift their demand curves out as the total number of comsumers in the network increases. this made me wonder, are there cases in which the opposite is true (i.e. consumers shift their demand curves in as the size of the network increases)? A couple of markets that come to mind are collectibles. The more friends of mins that have beanie babies, the less I want one for myself. The same may be true for certain tech products in so much that they are also status symbols as long as there is some exclusivity to them (e.g. latest wireless gadget, etc). Might the same be true of weapons technology? I might be most interested in having the weapon that nobody else has. When everyone has nuclear weapons, I might value having them less. The commonality here seems to be that the spread of a good through the network neutralizes some of the value for any individual consumer.